Transcript: ‘The Venture Capitalist Who Finds the Best AI Products—Before They Win’

The transcript of AI & I with Nabeel Hyatt is below. Watch on X or YouTube, or listen on Spotify or Apple Podcasts.

Timestamps

1. Introduction: 00:01:32
2. Why Nabeel doesn’t invest in more than two companies per year: 00:01:50
3. Why the words you use to describe your business matter: 00:06:49
4. What does a product with soul look like: 00:13:45
5. Patterns in the remarkable founders Nabeel has invested in: 00:16:48
6. How Nabeel evaluates popular coding agents: 00:24:12 
7. AI has broadened the horizons of what Nabeel can do: 00:32:29
8. How funding models are changing as AI makes it cheaper to build software: 00:36:28
9. Nabeel’s framework for when to trust an LLM: 00:45:43
10.  Guide AI to provide context (and not just quick answers): 00:55:39

Transcript

Dan Shipper (00:01:32)

Nabeel, welcome to the show.

Nabeel Hyatt (00:01:33)

Good to be here.

Dan Shipper (00:01:34)

So for people who don't know you are a partner at Spark Capital.

Nabeel Hyatt (00:01:38)

That's right.

Dan Shipper (00:01:39)

You've made a bunch of impressive investments including in Cruise, Discord, a very recent one is Granola. And before we started, you said something I didn't know about you, which is that your investing strategy is not prolific. You only do a couple a year. Why is that?

Nabeel Hyatt (00:01:57)

First of all, I just think that— So, I was a founder before becoming an investor. And I found that I had no horror venture capital stories that sometimes investors have or entrepreneurs have. But I also basically had a bunch of no ops. I had investors that were fine and great board members and maybe offered a random piece of advice, but weren't in the muck enough and in the nuance enough to give good feedback because they were investing in 15,000 things.

Dan Shipper (00:02:25)

What does “no ops” stand for? No opposition?

Nabeel Hyatt (00:02:28)

Yeah. They were just fine. There was no damage. I don't have a horror story, they did no harm, but it was also like, would the company have been exactly the same if they were not there? Probably. And there's a thing on our website that I think we collectively believe at Spark, which is that there aren't really any startup playbooks. I think as a founder you're doing something super unique with Every, so you probably already believe there's really no playbook for what you're trying to do, but generally every single journey is unique and the devil’s in the details. And so I think for me, the proxy is if you're a startup CEO or running a small org, you can manage eight or nine direct reports where you kind of understand everything they're doing. And outside of that, the edges get fuzzy and it's just the same thing. I want to work with eight or nine or 10 companies really closely as much as a founder really wants me around and I go away if it's not. And so you try to make the rest of the math work and construct life about the way you want to live and then see if you can make it work vs. letting somebody's financial or business model force you into working on what you don't want to work.

Dan Shipper (00:03:43)

I like that. I mean, I think it takes some balls. It's better than I think, obviously, the sort of spray and pray, small checks into a lot of things, that's a well trod strategy. But taking enough risk to be concentrated and to actually call your shot is, I think, quite cool.

Nabeel Hyatt (00:04:05)

Well, spray and pray even on the front end. I mean, basically the whole venture capital industry, since I joined—I've been doing this for a little over a decade now—is basically doing that at both ends of the spectrum, right? You've got the, I'm going to write $100,000 checks into a million things. And then you have the, well, if I raise $100 billion, then I can own a proxy of the whole market firms, which is like a lot of our peers that started there at the same time we did. That's been their strategy to mitigate risk over time. And I'm like, look, the whole point of this thing is risk—accept the risk and go do the work you want to do with good people.

Dan Shipper (00:04:37)

That is interesting. Something about what you said about doing something unique triggered something for me. I think you'd have good thoughts on this, which is I feel like I've been grasping for words for how to describe what Every is for a while. And I think that that's a really interesting place to be because we're doing something that's working and there isn't yet a word for it. The closest thing I've come up with is “multimodal media company.”

Nabeel Hyatt (00:05:05)

Wait, what was the other idea you had a little while ago that was not good?

Dan Shipper (00:05:15)

Malleable media.

Nabeel Hyatt (00:05:16)

That's terrible.

Dan Shipper (00:05:17)

Meta media. Multimodal media is my— 

Nabeel Hyatt (00:05:18)

I like multimodal media.

Dan Shipper (00:05:20)

But there’s a lot of m’s in it, which is a problem. So like it's multimodal publishing maybe? I don't know. We're working on it, but the point is we publish writing, we publish videos, we publish podcasts, and we publish software.

Nabeel Hyatt (00:05:30)

But that's of the time, right? Publishing software is a lot closer to publishing articles in 2025 than it was 10 years ago, right? That’s a new thing.

Dan Shipper (00:05:40)

Yeah. So there's not really a word for it. So I'm trying to figure that out, but there's this interesting thing where I'm realizing that working on something that I don't have a word for is actually really valuable and really cool, especially because it's starting to work. But then there's also this trap that I think you can get into sometimes. And I've definitely fallen into this too, where it's like, you think you don't have a word for it, but there is actually a word and it's been done a lot before. And you can't fool yourself.

Nabeel Hyatt (00:06:11)

Do you have an example of that in your head?

Dan Shipper (00:06:15)

I don't have a specific example off the top of my head, but I don't know— When we started Every, for example, we were like, oh, this kind of media company has never been done before. We wanted to be a bundle of different newsletters. And like, it's a magazine.

Nabeel Hyatt (00:06:31)

A bundle of newsletters is a magazine.

Dan Shipper (00:06:35)

Yeah. And so, there were some things that were different about it, but about a year or two in, we realized that all of the complexity that we had built into the model didn't need to be there, and the way the newsletter worked was sort of like a magazine.

Nabeel Hyatt (00:06:49)

That's the tension, though, in anything new, which is like, of course it proxies to something that's pre-existing. Of course it proxies something that— But if you then adhere— Did something change in you when you start calling it a newsletter? Because that's also a trap. The early days of— We were an early investor in Postmates and back in this on-demand lane you had Postmates and Uber and DoorDash and Lyft and the Twitterati looks at that and is like, that's just a delivery company. That's the same thing as a taxi company. And yet, if those founders had internalized that and just been like, yeah, we're just a taxi company, you just wouldn't have done any of the things that you ended up doing over time. And so, I think the definitions really matter if you're doing something new, which I think you are trying to grasp for something new right now. I would find the weird words that are capturing that essence inside of you, right?

Dan Shipper (00:07:54)

I think for me, actually calling us a newsletter was quite freeing because we were doing all this complicated stuff to not just be a newsletter. And then once we just dropped it and it was just like, no, it's just a newsletter. And it's a bunch of creative people writing stuff and we're going to do interesting stuff. We just don't know what it is yet. But for now we're just going to write, because that's what we love to do. That was really helpful because I think what's been quite important for me entrepreneurially is to start to be really comfortable with whatever it is that I authentically believe in and want to do as opposed to triangulating between what I believe in, what I think will sound okay, and what I think I can justify basically. And thinking like being able to say, no, it's a newsletter and I'm going to write a lot was an expression of that. That's what I want to do. And everything else flowed from that. And then we found some new stuff that we're doing that is like, oh, I can't really describe what this is, but it's really cool. And there's this creative soup happening and I'm really excited. It's so fun. So yeah, obviously, in entrepreneurship in general, there are no hard and fast rules. Sometimes you don't want to call yourself a newsletter because you want to find the magical thing, but you don't want to force it.

Nabeel Hyatt (00:09:04)

Yeah. And the irony of this conversation is that what you're doing to find what you really want to do is a little bit rooted in the past, but also this awkward new thing you're now trying to describe. And then, what I found that I really want to do is also anachronistic, but because it's the old way of venture capital used to be like, I just want to invest in a handful of companies, work really close to those founders in a smallish firm where I trust my partners. We all work together on something. There's only seven of us on the venture team at Spark and that was how Sequoia was 40 years ago, and it worked well, it's just not the way people are building firms today.

Dan Shipper (00:09:40)

Yeah, what does that do now that the ecosystem is these gigantic megafunds that look at seed investing as loss leaders for big growth rounds? How are you thinking about how that changes—or it seems like it doesn't really change what you're doing, but how does it affect your approach?

Nabeel Hyatt (00:09:57)

I think an important start of this is we're still good citizens with all of these players as well. You end up co-investing with people.

Dan Shipper (00:10:07)

I really wanted you to shit on them.

Nabeel Hyatt (00:10:10)

I know. I was like, I must hold back slightly. I think those firms are a viable strategy. I think they are a different product. And as long as a founder understands what product they're buying, then I'm super happy with all of them existing in the ecosystem. I think the things that make me frustrated is when I'm in a conversation, sometimes it's with the current founder. I'm on the board of this company, they're going out to raise. So nevermind I'm competing with them. They're going out to raise a Series B or a Series C and. And the stories they're being told by investors about what the product is without going through the whole— It's just not entirely true. You cannot be investing five times a month and operating out of a $10 billion fund and get anything more than a random phone call every four years on a thing. And there are firms that are very good at being transparent about that transactional relationship. You get the money and you run away. I think actually Founders Fund is very good at being pretty transactional. I mean, they’re very honest about this. And there's lots of other people that do a lot of storying around what they're selling. So as long as people know what they're buying and what they're selling, it's fine. We sell a different thing. And for some founders that's really important and it's wonderful and they want that process and some don't—you have a connection, a kismet with anybody or you don't. And we work on those things.

Dan Shipper (00:11:40)

That makes sense. Well, I want to talk about one of your latest investments, which is Granola, which is one of my favorite AI products. And I think it's becoming one of everybody's favorite AI products. We've had Chris on the podcast. Chris wrote an article for Every that did really well. It's like really amazing stuff. I think he's super talented. What did you see in that when you invested? Well, when did you invest? Was it before they had the product they have now? Or was it after?

Nabeel Hyatt (00:12:08)

So I've known Chris for over a decade. Chris was a founder of a company called Socratic back in the day, a kind of previous AI generation. And that was actually a Spark portfolio company. And so he's been part of the family for a really long time. And his first attempt at making this—as he'll talk about now—was a little bit of a misfire. So he got to notes as a canonical thing that you can work on. But it was very interruptive and the use flow without going through it all just wasn't the thing. It was like the place to play, but not the thing. And so I hung out with him a bunch at seed. We played and talked about product and looked at early prototypes and so on and so forth. And, for us, it just wasn't over the line, and so he did raise a seed from somewhere else. And then we just connect with certain people, and so we just kept in touch. And then probably about four, five, six months—something like that—after the seed, he stumbled into what is now Granola. As soon as you play with that, and if you have any taste or product sense, you're like, oh, this is the thing. That's great. Let's go. And so we then catalyzed around really quickly at that point. 

Dan Shipper (00:13:25)

And that was a big round, right?

Nabeel Hyatt (00:13:28)

I don't know what big is.

Dan Shipper (00:13:30)

It was like $20 million, right? That's pretty big.

Nabeel Hyatt (00:13:32)

The thing that felt so unique— And I know you're somebody that— I listen to your podcast. We've caught up a bunch. I know you're somebody that struggles with it as well, there's a— I don't know. Rory Sutherland says there's like three types of innovation and his canonical way of talking about the world, which is, there's faster horses and which, obviously, just make the thing go faster. And, then there's teleportation, which is this thing that you don't know. You want it to exist, you don't know how to get there. But if I tell you you want teleportation, you want teleportation. Everybody wants teleportation. Should we have a colony on Mars? It'd be awesome! I don't know how we're gonna do that. And then there's Japanese toilets, which is like, you didn’t know you needed Japanese toilets in your life until the first time you went to Japan and you’re like why isn’t this everywhere? And it’s not even that complicated. And that’s Granola.

The thing is it's not like the execution is actually really subtle. It's really hard. But I think for me, the things I'm wandering around and trying to find are the Japanese toilets of AI. The faster horses are mostly what's getting funded. It's mostly what's come out of this B2B SaaS big industrial machine that we have in venture capital is churning out startups after startups and incubator after incubator and most of that stuff is fine and it'll also be arbitraged out of existence in four years and who cares. And so mostly I am looking for mostly new experiences, things that surprise you with the place that they're playing. And so, for me, when I use Granola, I’m like, oh, this is so intuitive. It's the 50,000th AI note taker. Did the world need another AI note taker? It's like, yes, except I didn't want to use any of those other AI note takers.

Dan Shipper (00:15:36)

Ugh. When Fireflies joins my Zoom meeting, I never let it in.

Nabeel Hyatt (00:15:42)

Oh the anger. The immediate anger. And whereas this is just like, no, it just basically looks like Apple Notes. And it's just going to append a little extra to the things that you took notes on and make you a little smarter along the way. Yeah, that's brilliant.

Dan Shipper (00:15:55)

How do you think you become someone who makes a Japanese toilet vs. a faster horse? I was talking to Chris about the way he thinks about the soul of a product and the way his intuition works and all that kind of stuff. And I'm kind of curious. I assume you've invested in other people that have that same kind of archetype. What have you learned about that?

Nabeel Hyatt (00:16:19)

Yeah, there's a similar journey to Andrew Mason of Descript. There's a similar journey to an investment I did that was just announced recently called Wordware. They have a similar milieu, which is very different from, I would say, Kyle Vogt at Cruise. That's an example. That's a teleportation pitch. That's self-driving cars—amazing, probably impossible. Can you do it? That's a very different kind of pitch. 

What are the habits of those kinds of founders or what are the journeys that they're on? I would say that the remarkable thing that comes out about a person like that usually comes out when they're talking about how they got to whatever solution that they're talking about. What is the right answer here? What's the authentic answer here? Why is Chris or Andrew really special? I'm trying to think about this through the lens of when those kinds of founders come into our firm, you can feel it in the room. It's not just me. The whole team, and this is partially because we cast for these types of people, but the whole firm rallies pretty quickly. And so what are the patterns in that pitch? It's usually that they are telling you insightful reasons why they put things into the product that you would have never normally thought of from customer development calls.

Dan Shipper (00:17:54)

So it's some combination of storytelling and attention to small details in a way that levels up into something that makes all make sense together?

Nabeel Hyatt (00:18:02)

Yeah. There's some connectivity between the choices a person made in the product that you can feel and some insight about a customer. If they're listening very, very closely to the behavior of what’s happening. And so in Chris's case, it's just noticing, for instance, the very first version of Granola was a tab complete, almost like Copilot, right? So you type a couple words in, and you type tab, and it starts filling out. Seems actually kind of magical when you first look at it. But if you just like listen to yourself closer, if you're self aware enough closer, especially if you're the user of the product and you're your own customer, you've realized I'm kind of super distracted in this meeting because every time I press tab, it fills out things and it makes an error and then I want to correct the error and now I'm not paying attention. I'm making eye contact. It's not why I'm on this zoom call. It’s not brilliance. It's not even creativity in a canonical definition of creativity where you come up with 15,000 ideas. It's more like investigation—

Dan Shipper (00:19:18)

A word that's coming to mind is sensitivity. You're sensitive to what's actually going on. You’ve got your hands like all in the milieu and you can kind of feel the changes in the weather patterns or something like that.

Nabeel Hyatt (00:19:27)

Yep. Yeah. The spectrum scale is like how much kinetic energy do you have? Because you have to move very fast. But we all know people that are just all horsepower. They're just kinetic energy. They're the people that are like, I want to start a startup. And the way I'm going to start a startup is I'm going to come up with a new business plan every single day for the next three months until I find the right thing. And I'm going to push it to that. And that's good kinetic energy without a lot of sensitivity. They're trying to plow through the problem. They are very, very uncomfortable with the fog of war, with wandering in the wilderness to find the thing. So the opposite spectrum is sensitivity. And the problem is that sometimes if you go too far on the sensitivity side, then you're the artist who just has absolute analysis paralysis. You just think and think and think and think and think and think and think and think and think and think and you, and it's just too slow. Your iteration cycle is too slow. And again, you're trying to solve by listening closely—that fog of war. You're trying to just listen to every single animal in the forest to figure out how to track it before you walk in. I think those types of founders you're trying to sense for are, they have a pronation to movement. They will move, but they will move while still listening. 

Dan Shipper (00:20:55)

I love that. That's beautiful. Tell me about Wordware because I have a feeling that there's something very spiritually aligned between Wordware and whatever it is that I'm doing.

Nabeel Hyatt (00:21:05)